Capital taxation during the U.S. Great Depression
AbstractPrevious studies quantifying the effects of increased capital taxation during the U.S. Great Depression find that its contribution is small, both in accounting for the downturn in the early 1930s and in accounting for the slow recovery after 1934. This paper confirms that the effects are small in the case of taxation of business profits, but finds large effects in the case of taxation of dividend income. Tax rates on dividends rose dramatically during the 1930s and, when fed into a general equilibrium model, imply significant declines in investment and equity values and nontrivial declines in gross domestic product (GDP) and hours of work. The results are amplified if businesses make intangible investments which can be expensed from taxable capital income.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Working Papers with number 670.
Date of creation: 2010
Date of revision:
Other versions of this item:
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ACC-2009-05-23 (Accounting & Auditing)
- NEP-ALL-2009-05-23 (All new papers)
- NEP-DGE-2009-05-23 (Dynamic General Equilibrium)
- NEP-HIS-2009-05-23 (Business, Economic & Financial History)
- NEP-PUB-2009-05-23 (Public Finance)
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